UPSC Previous Year Question | Prelims GS | 2026

The artificially fixed rupee-sterling exchange rate prescribed by the Hilton-Young Commission (1926) was adopted by the British Government for which one of the following reasons?

  1. Aiding the flow of remittances from India and maintaining India's creditworthiness
  2. Providing support to Indian importers
  3. Encouraging export of cotton produce from India
  4. Preventing depreciation of the Rupee in terms of gold

Answer

Correct Answer

Aiding the flow of remittances from India and maintaining India's creditworthiness

Explanation

The Hilton-Young Commission recommended a fixed rupee-sterling exchange rate of 1 shilling 6 pence per rupee. The artificially strong rupee helped the colonial government meet sterling-denominated obligations, including Home Charges and other remittances to Britain, with fewer rupees. It therefore facilitated the flow of funds to Britain and supported India's creditworthiness in sterling transactions.

Topics: colonial economy, currency system, hilton-young commission, modern history